David Howell: 'Austerity politics is leading to reductions in government employment'

In Friday's press release for the employment numbers for May, the Bureau of Labor Statistics' lead was "no change": non-farm employment "changed little (+69,000)" and "the unemployment rate was essentially unchanged at 8.2%".

But little change in a severely depressed labor market is very bad news for workers. Even worse news for the Obama administration is that the labor market so far in 2012 shows no sign of the turnaround he needs.

While it's true that the increase in employment of 69,000 was not much below April's gain of 77,000, it was 143,000 in March and higher than that in February. The unemployment rate's increase from 8.1% to 8.2% can be viewed as essentially unchanged because it's small – but, if these figures hold up, the data still show 220,000 more unemployed than the month before.

Unfortunately, the bad news is likely to hold up because the same trends appear across lots of related indicators: the recently unemployed (less than five weeks) increased from 2.54m to 2.5m; seasonally adjusted initial unemployment insurance claims rose by 10,000 (to 383,000, about where it has been stuck for the last six months – despite the tightening of eligibility requirements by many states); the long-term unemployment rate (27+ weeks) increased quite substantially, from 5.1m to 5.4m, as did the median duration of unemployment, from 19.4 to 20.1 weeks.

Significantly, the number of those working part-time who want a full-time job also increased, from 7.8 to 8.1 million. And to top it off, average hourly pay for non-supervisory workers has been flat at $19.70 (up three cents from March).

The problem, of course, is that while private-sector employers have not been hiring at a pace that will offset the massive job destruction of 2008-10, austerity politics is actually leading to absolute reductions in government employment, and at an accelerating rate. Obama is in a tough spot: even if employment picks up dramatically, the unemployment rate could continue to increase as millions of discouraged workers re-enter the labor force.

David Howell is a professor in public and urban policy at the New School in New York City

Robin Wells: 'This is a legacy of the too-small, shortlived federal stimulus'

There's no putting a gloss on it: Friday's numbers for jobs created in May, 69,000, were miserable. Last month, American employers added the smallest number of workers in a year, leading the unemployment rate to tick upwards from 8.1% to 8.2%. If the Obama people are not panicked, they should be. It is five months before the general election and it appears that the economy is faltering, yet again.

It's a disappointing turn of events, as it appeared that the pace of economic activity had been gradually picking up. Manufacturing activity continues to expand (although at a slightly slower pace than in April). At the same time, consumers are cautiously spending more and incomes are creeping upwards. And households are slowly working down the massive levels of private debt that is the legacy of the housing bubble burst.

So what has gone wrong?

The majority of the blame has to be leveled at the massive cutbacks in public spending that are happening at state and local levels. Thursday's Commerce Department report confirmed it: cuts in state and local government spending are, indeed, hurting economic growth. Overall government employment (a combination of federal, state and local) has fallen significantly under Obama, with education being particularly hard hit.

This was not inevitable. It is the legacy of a too-small and too-shortlived federal stimulus, which, due to Republican intransigence, underfunded aid to the states and ended much too soon. And in some cases, it is the result of bare-knuckle political tactics of Republican governors. New Jersey's Chris Christie, for example, turned down billions in federal aid to fund what would have been the largest public works project ever (a new rail tunnel linking New Jersey and New York City) – because it would have required him to impose a modest increase in the state gasoline tax.

It's the perfect crime: because voters don't connect an inadequate stimulus bill passed over three years ago to today's current economic problems, Republicans have inflicted heavy long-term damage on the economy without leaving any fingerprints. Moreover, it's a crime for which they are seeking to make Obama pay for in November.

The May jobs report is a second consecutive-monthly disaster. Non-farm job creation in May was only 69,000; 82,000 in the private sector, while payroll employment growth for March and April was revised downward. The unemployment rate ticked up to 8.2%.

Past the top line, the Hispanic unemployment rate, a critical electorate, jumped to 11%. Finally, hours, earnings, and payrolls were down, providing little support to family incomes and continuing a very weak recovery in real, disposable income.

In short, for the second straight month, the report showed too few jobs and not much income. The one glimmer of bright in the data was a rise in employment as measured in the household survey after two consecutive months of decline.

The White House will be be running out of weather-related adjustments to the data and other statistical explanations. This is just a flat-out weak report. It comes at an unfortunate time for the president, as voters are firming their perceptions of the economy in advance of the November election.

In light of the bad bottom line – the April jobs report was awful and May continues the trend – and given the weakness in Europe and the Congressional Budget Office warning of recession, it might be time for the president and Senate Democrats to get serious about avoiding the sharp tax increases and spending cuts scheduled for the end of the year.Douglas Holtz-Eakin is president of the American Action Forum

However one looks at today's jobs report, it's a stunning reminder of how anaemic the recovery has been – and how perilously close America is to falling into another recession.

Not only has the unemployment rate risen for the first time in almost a year, to 8.2%, but, more ominously, May's payroll survey showed that employers created only 69,000 net new jobs. The Labor Department's Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months. To put this into perspective, between December and February, the US economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide. At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.

Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiralling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they're slowing as well. All this takes a toll on US exports.

But a bigger part of the problem is right here in the United States, and it's clearly on the demand side of the equation. Spending by American consumers constitutes 70% of economic activity in the US. Yet, American consumers don't have the cash or the willingness to spend more. Not only are they worried about keeping their jobs, but their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents – an increase of 1.7% from this time last year – but that's less than the rate of inflation. The average work week slipped to 34.4 hours in May.

To make matters worse, the value of their homes – their biggest assets by far – continues to decline. Home values are, on average, a third below their peak in 2006. This obviously makes US consumers feel even poorer.

Big US companies are still sitting on a huge pile of cash. They won't invest it in new jobs because American consumers aren't buying enough to justify the risk and expense of doing so. The paradox is that US corporate profits are still healthy, largely because companies have found ways to keep payrolls down – substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that's exactly the problem. In paring their payrolls, they have pared their customers.

Public policy can't rescue the US because there's no ready means of making up for the shortfall in consumer demand. Federal stimulus spending is over, and Republicans in Congress will not support additional public spending. In fact, state and local governments continue to lay off large numbers. The government cut 13,000 jobs in May. Instead of a boost, government cuts have become a considerable drag on the rest of the economy.

Republicans will have a field day with today's jobs report, taking it as a sign that Obama's economic policies have failed and we need, instead, their brand of fiscal austerity combined with more tax cuts for the wealthy. That's precisely the reverse of what's needed.

If Obama had the votes in Congress, he'd be calling for a cut in the payroll tax that now takes 6% of every working person's wage. Exempting the first $20,000 of income from this tax for the remainder of 2012 and all of 2013 would immediately put money into Americans' pockets, much of which they'd spend. Obama would also call for more spending to repair America's crumbling infrastructure. With all the foreign savings flowing into dollars these days, the US can borrow at rock-bottom rates.

But with a presidential election only five months away, Republicans won't vote for anything Obama suggests. They've barely cooperated since the beginning of his presidency.

The White House can only comfort itself in the knowledge there are still five months between now and election day, so the jobs picture could brighten between now and then. After all, we went through a similar mid-year slump in 2011, but came out fine.

Robert B Reich is professor of public policy at the University of California at Berkeley